Thoughts about the markets, automated trading algorithms, technical analysis, and lots of other stuff.

Current Affairs

January 20, 2019

I went to Havana with a diverse group of business people, financial professionals and representatives from the US Fed.

Here is a photo taken with some of the classic cars that proudly dominate the roads despite cheaper Russian and Chinese alternatives.

The city was beautiful … dirty and broken, for sure … but still beautiful. Here is a view from my hotel room.

I commented that it was almost like seeing a severely wounded elephant. You can tell that it's hurt (and barely a shadow of its old self). Nevertheless, you can see the amazing bone structure. It is easy to imagine what it once was.

In Cuba, the geography and the architecture are amazing. However, money hasn't been spent on the upkeep. Even though people live there, it seems surreal (almost like a post-apocalyptic wasteland).

In the story of Exodus, the Jews spent 40 years wandering the desert after escaping from Egypt. That means two generations of people, who didn't remember life as slaves, were ultimately the ones who entered the “Promised Land”.

On some level, that's how Cuba is now. Most inhabitants weren’t born (or can’t remember) the 1960s. They have known nothing but this.

Cuba is an interesting place … and I’d bet that it has an interesting future.

The “lack” had a side effect. It produced a mutation. A portion of society grew more resourceful and resilient.

Like natural selection … nature finds a way.

The rules change, the players change, even the game itself changes ... That is how new ideas and new leaders emerge.

With that said, the next chart surprised me. It shows the number of years it took for various products to gain 50 million users.

Pornhub tracks data like its business depends on it. Well, it is the number one site for pornography. What does that mean? In 2018, over 5,517,700,000 hours of porn was watched on their site. That’s approximately 6,298 centuries of video.

Moreover, last year, it got 33.5 BILLION visits. That’s 1,064 people a second, or 92 million a day. To put that in perspective, that's more people than live in the entire country of Germany.

Here are some additional factoids about its use.

4403 Petabytes of data transferred (574 MB of data for every person on earth)

Consumed more bandwidth than the entire internet in 2002

Stormy Daniels was the number 1 "trend" search in 2018 (followed by Fortnite ...)

January 06, 2019

AI first broke onto the film scene with Metropolis in 1927. "Maria" the evil robot disguising herself as a human played on many human fears; deception, lack of control, and perhaps most importantly being replaced.

Maria represented a future that was bleak and set the foundation for AI in cinema. Since then, there have been approximately 100 movies starring AI.

According to Enlighten Digital, 52% of movies portray AI positively, which means it's about 50/50, and there has been a 144% increase in AI movies since 2010 - so we're becoming more saturated with AI.

According to a study by Cambridge, seeing more films portraying robots (whether positive or negative) is associated with more positive attitudes toward robots. This is in line with the theory that the more exposure one has with "out-group" members (i.e. robots, or people of other races) the more positive one's attitude toward them.

These movies all have different tones but there's a trope that remains common from that initial film in 1927 to films in 2018.

We're always imagining that next step. What's going to happen as AI becomes (in some ways) smarter than us? What's going to happen when our creations surpass our control? What's going to happen if the line between human and robot blurs?

There are a lot of advancements in real-life, in respect to AI. As such, there is a lot of movement on AI ethics, and how to best limit or best enable AI.

In film, we gravitate toward two extremes - utopias and dystopias. In real life, we can recognize those extremes are unlikely ... but the effect of AI is still profound.

We're expanding a technology with the ability to radically change our world - for better or worse - so it's important to keep a purpose-driven approach. We can't lose track of humanity in the pursuit of AI.

Metropolis's final title card (that first AI movie from 1927) still rings true ... "The Mediator Between the Head and the Hands Must Be the Heart"

I'm regularly surprised by the levels of innovation and strategic thinking that I see in football.

I've written posts about how much regular businesses could learn from watching football teams. That post talks about how even high school teams have a position-by-position depth chart. They have a game plan for their next opponent. They practice plays on both offense and defense. They watch game film of their past games and future opponents. And, they coach the team as a team, and the players individually.

Often, simple ideas, applied consistently, are enough to win.

Last night I was at a Dallas Cowboys playoff game (note that is not an oxymoron) ... and I took a picture with this guy.

I see him at every game ... and every game he wears a different creative and well-thought-out costume. He sits on the 50-yard line, He wears Ferragamo shoes and a nice watch. Yet, something about this game captures his imagination.

Yesterday, I also had the honor of meeting Gil Brandt at the game. For those of you not familiar with him, he was the vice president of player personnel (or Chief Scout) of the Dallas from 1960 to 1989. He helped Dallas grow into one of the most powerful and popular sports franchises in America. His innovative management and personnel systems are standard operating procedure today for many teams at the professional and collegiate levels nationwide.

Many consider him the architect of the Dallas Cowboys. I'm not talking about the stadium or headquarters, I'm talking about their teams and ideas that were the catalyst to "America's Team". I took this from his Wikipedia page.

He helped pioneer many of the scouting techniques used by NFL clubs today,[2] such as:

Using computers for scouting and talent evaluations. To achieve this level of automatization, the Cowboys had to systematically define which were the traits, measurable qualities and skills that could be expressed into numbers and formulas in order for a computer to understand them.[4]

Gil Brandt is one step closer to joining the NFL's ultimate pantheon – The Pro Football Hall of Fame. He has been nominated as a contributor finalist for the Class of 2019. The contributor category recognizes "individuals who made outstanding contributions to professional football in capacities other than playing or coaching."

He's an inspiration. Not only did he innovate how teams draft and measure talent ... he's the guy who figured out how to make cheerleaders an iconic symbol of a team and the game itself.

Over 41% of the land in the contiguous US revolves around livestock and livestock feed. The farmland used to feed us is an afterthought in comparison - it makes sense when people talk about cows' environmental effect.

Urban growth is outpacing other categories, but we're also doing a good job of repairing forestland. According to The Land Report magazine, the land owned by the top landowning families has grown to be larger than Florida - and is continuing to grow.

There are a couple extrapolations that you can make from this information - but I'm curious ... what do you take from this?

Most people aren't gamblers ... the fear of losing big inhibits them. However, when people were instructed to "think like a trader," they showed considerably less risk-aversion when gambling.

The illusion of control convinces us we can overcome the statistics.

When you almost get it right - when you miss the jackpot by one slot on a slot machine, when you just mistime a trade to get a big win - you're more likely to play longer, and place bigger bets ... because you're "so close".

It's human nature to want to feel in control.

This is why you find a lot of superstitious traders & gamblers. If you wear this lucky item of clothing ... if you throw the dice in this particular way ... if you check your holdings at this time every day ... you have control.

There is a big difference between causation and correlation.

It is not hard to imagine that the majority of a trader's activities do little to create a real and lasting edge.

Skill vs. Luck

There are games of skill, and there are games of chance.

In a casino, poker and blackjack are considered games of skill. In contrast, slot machines are considered a game of chance.

In trading, predicting markets is much different than using math and statistics to measure the performance of a technique.

Much of what we do is to figure out how to eliminate the fear, greed, and discretionary mistakes humans bring to trading.

In trading, "Alpha" is the measure of excess return attributed to manager skill, rather than luck or taking on more risk.

We believe in Alpha-by-Avoidance ... Meaning much of what we do is figure out what to ignore or avoid so that the majority of the games we play are games of skill rather than games of chance.

December 02, 2018

I love him and miss him ... but, truth be told, I teased him mercilessly about being technologically challenged (especially around the holidays, when I'd buy him a new gadget – only to roll on the floor laughing while watching him try to figure it out).

Karma is a bitch! My Dad used to say "whatever you make fun of me for ... will happen to you."

I didn't yet realize how fast the world was changing ... or how quickly I'd find it hard to keep up.